WASHINGTON, D.C. / RankWire.AI / – The U.S. dollar hovered near a three-month trough on Thursday, driven by a drop in long-term Treasury yields. The dollar index traded around 98.81 against a basket of six major currencies. The euro appreciated to roughly $1.1676, reaching its strongest level since late May. The Japanese yen also strengthened, trading close to 158.45 per dollar. Meanwhile, the British pound remained near its three-month peak. Currency markets responded to falling bond yields, influenced further by new details from the Federal Reserve and the U.S. Treasury Department.
An announcement from the U.S. Treasury Department revealed an increase in liquidity-support buybacks for longer-term government debt. Eligible operations will see maximum purchases double from $2 billion to $4 billion. This expansion applies to nominal coupon securities with maturities between 10 and 20 years, as well as those in the 20 to 30-year range. The larger transactions are scheduled to commence on September 9 and conclude by November 4. Officials also plan to release an updated tentative schedule for these operations.
The yield on the 30-year U.S. Treasury bond traded near 5.18% on Thursday after a decline during the previous session. Earlier in the week, this yield hit 5.337%, its highest point since 2007. The pullback in yields coincided with a renewed weakening of the dollar across major currency pairs. Treasury yields serve as a key indicator for global markets and dollar-denominated securities. The Treasury Department’s expanded buyback program will be active throughout the current quarterly refunding period.
Weakening dollar bolsters major currencies
The euro maintained its position above $1.16 following a recent rally against the dollar. Sterling traded near $1.3604, staying close to its highest level in roughly three months. The Swiss franc held around 0.7999 per dollar. The Japanese yen also appreciated after nearing the 160-per-dollar mark. In contrast, the dollar index remained below 99, nearing its lowest point since May. Foreign exchange markets continued to reflect recent movements in U.S. yields and monetary policy data.
Minutes from the Federal Reserve’s July 28 and 29 meeting highlighted ongoing concerns about inflation. The committee kept the federal funds target range steady at 3.5% to 3.75%, with nine members supporting this decision and three favoring a quarter percentage point hike. The Fed also noted that U.S. economic activity persisted in expanding at a solid pace, although inflation stayed above its 2% goal during the period covered by the meeting.
Federal Reserve minutes underscore inflation worries
Several policymakers signaled readiness to support a rate hike during the July meeting, suggesting that higher rates might be necessary if inflation does not trend toward 2%. The central bank continued its strategy of maintaining ample reserves within the banking system and rolled over principal payments from Treasury securities at auction. The Federal Reserve’s next scheduled monetary policy meeting is set for September 15 and 16.
The recent dollar performance reflected markets’ reactions to lower long-term yields and updated U.S. policy signals. During Thursday’s trading, the dollar index remained close to a three-month low, while the 30-year Treasury yield stayed below the 19-year high seen earlier this week. Treasury buybacks under the expanded schedule will commence in September, and the Federal Reserve continues to hold its benchmark rate range steady. These factors played a central role in currency and U.S. government debt trading activity.